Keeping large projects under control: The importance of contract type selection

In a previous paper, it was shown that the use of alternate contract types containing incentive provisions, could represent an adequate means of controlling project expenditure. As most of these contract types originated in the USA, a study was performed to analyse the applicability in Europe. This study was undertaken during the period 1984-1987 in the Faculties of Mechanical Engineering and Aerospace Engineering in the Section of Industrial Organization and Management of the University of Technology, Delft, the Netherlands. The complete results are reported in a separate paper by Peeters; this paper simply highlights some important findings. The different contract types are described, with specific emphasis and formulas for the three contractual parameters of major influence (cost, delivery time and performance). A final model is presented in the form of a decision tree, which make it possible to select objectively the most appropriate type of contract for each specific case.